Spreading your risk across different asset classesSpreading your risk across different asset classes 1 THE BASICS OF INVESTING: 2 WHAT IS DIVERSIFICATION? * Diversification is a technique
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THE BASICS OF INVESTING: DIVERSIFY YOUR PORTFOLIO Spreading your risk across different asset classes
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THE BASICS OF INVESTING:
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WHAT IS DIVERSIFICATION?
* Diversification is a technique to help reduce risk. There is no absolute guarantee that diversification will protect against a loss of income. Please keep in mind that there are risks associated with investing in securities including loss of principal.
• Spreads risk among different asset classes
• May reduce overall portfolio volatility*
• Asset class performance varies
• Diversify… − Across Asset Classes − Within Asset Classes
Non-Equities Equities
28.55%20.06%
-43.34%
-12.47%
53.99%
-1.38%
9.84% 9.84% 10.50%
-60%
-40%
-20%
0%
20%
40%
60%
1 Year 5 Years 10 Years
Highest Annual Return Lowest Annual Return Average Return
How time helps manage risk
Chart illustrates returns from 1/1/1926 – 12/31/2012. Source: © Ibbotson Associates, a wholly owned subsidiary of Morningstar, Inc. These returns are illustrative only and do not reflect TIAA-CREF performance; past performance isn’t indicative of future results. Benchmark: Ibbotson Associates, Inc., S&P 500 Index. You cannot invest directly into an index.
The range of annual total returns for common stocks* (1926-2012)
Aver
age
rang
es o
f ret
urn
22.51% 16.32%
-8.09% -2.22%
42.56%
0.98%6.06% 6.05% 6.00%
-20%
0%
20%
40%
60%
1 Year 5 Years 10 Years
Highest Annual Return Lowest Annual Return Average Return
How time helps manage risk
Chart illustrates returns from 1/1/1926 – 12/31/2012. Source: © Ibbotson Associates, a wholly owned subsidiary of Morningstar, Inc. These returns are illustrative only and do not reflect TIAA-CREF performance; past performance isn’t indicative of future results. Benchmark: Ibbotson U.S. Long-Term Corporate Bonds. You cannot invest directly into an index.
The range of annual total returns for corporate bonds (1926-2012)
Aver
age
rang
es o
f ret
urn
• A group of investments that share common characteristics
• Risk may decrease as the number of asset classes increases
• Help manage risk by diversifying holdings among different asset classes
THE BASICS OF INVESTING: UNDERSTANDING ASSET CLASSES
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$7.63$4.98
$33.21
$0.00
$5.00
$10.00
$15.00
$20.00
$25.00
$30.00
$35.00
S&P 500 S&P 500 minus best 15months
Treasury Bills
Market timing can be dangerous
Hypothetical value of $1 invested from 1980-2012
Chart illustrates returns from 1/1/1980 to 12/31/2012. © 2012 Ibbotson Associates, Inc., a wholly owned subsidiary of Morningstar, Inc. Source: Large Company Stocks – Standard & Poor’s 500®, which is an unmanaged group of securities and considered to be representative of the stock market in general. An investment cannot be made directly in an index. Stocks are not guaranteed and are more volatile than other asset classes. Chart is for illustrative purposes only and not indicative of any TIAA-CREF investment. Past performance is not a guarantee of future results.
Based on your risk tolerance, what category of investor are you?
THE BASICS OF INVESTING: WHAT’S THE BEST ASSET ALLOCATION MIX FOR YOU?
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ASSET ALLOCATION IS IMPORTANT
*Based on the claims-paying ability of TIAA. The specific asset allocations shown in the model portfolios were generated by Ibbotson Associates, one of the nation’s leading financial advisors. They are based on well-known optimization techniques, using historical return, volatility and correlation data from indices like the Russell 1000 stock index. This optimization procedure is based on assumptions about historical market data, and future market conditions may vary from these assumptions.
Conservative 13%
27%
7%
40%
13%
THE BASICS OF INVESTING:
Guaranteed* Fixed Income Equities Real Estate Money Market
ASSET ALLOCATION IS IMPORTANT
*Based on the claims-paying ability of TIAA. The specific asset allocations shown in the model portfolios were generated by Ibbotson Associates, one of the nation’s leading financial advisors. They are based on well-known optimization techniques, using historical return, volatility and correlation data from indices like the Russell 1000 stock index. This optimization procedure is based on assumptions about historical market data, and future market conditions may vary from these assumptions.
Moderate
53%
15%
7%
20%
5%
THE BASICS OF INVESTING:
Guaranteed* Fixed Income Equities Real Estate Money Market
ASSET ALLOCATION IS IMPORTANT
*Based on the claims-paying ability of TIAA. The specific asset allocations shown in the model portfolios were generated by Ibbotson Associates, one of the nation’s leading financial advisors. They are based on well-known optimization techniques, using historical return, volatility and correlation data from indices like the Russell 1000 stock index. This optimization procedure is based on assumptions about historical market data, and future market conditions may vary from these assumptions.
Aggressive
85%
10% 5%
THE BASICS OF RETIREMENT:
Guaranteed* Fixed Income Equities Real Estate Money Market
Rebalancing and Reallocation are asset allocation strategies used to methodically restore your portfolio targets
THE BASICS OF INVESTING: PORTFOLIO ADJUSTMENTS ARE NOT TIMING OF THE MARKET
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Rebalancing does not protect against loss or guarantee that your financial goals will be met.
THE BASICS OF INVESTING:
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WHAT IS REALLOCATION? Making new contributions to accounts that are different from those you originally selected.
NEW ALLOCATION* ORIGINAL ALLOCATION*
New Account Premiums
20% Fixed 80% Equity
35% Fixed 65% Equity
THE BASICS OF INVESTING:
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WHAT IS REBALANCING?
*
Adjusting the current assets in your portfolio to restore your original target
20% Fixed 80% Equity
35% Fixed 65% Equity
New Account Premiums
Rebalance Your Accounts
NEW ALLOCATION* ORIGINAL ALLOCATION*
• Avoid market timing
• Include several different asset classes
• Rebalance your portfolio
• Reallocate your contributions when needed
THE BASICS OF INVESTING: ASSET ALLOCATION SUMMARY
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For Institutional Investor Use Only. Not for Use with or Distribution to the Public. | 15
Questions and Answers
Important Information
Investment, insurance and annuity products are not FDIC insured, are not bank guaranteed, are not bank deposits, are not insured by any federal government agency, are not a condition to any banking service or activity and may lose value.
Investment products may be subject to market and other risk factors. See the applicable product literature or visit www.tiaa-cref.org/ndpers for details.
You should consider the investment objectives, risks, charges and expenses carefully before investing. Please call 877 518-9161 or visit www.tiaa-cref.org/ndpers for a current prospectus that contains this and other information. Please read the prospectus carefully before investing.
TIAA-CREF Individual & Institutional Services, LLC and Teachers Personal Investors Services, Inc., members FINRA, distribute securities products. Annuity contracts and certificates are issued by Teachers Insurance and Annuity Association (TIAA) and College Retirement Equities Fund (CREF), New York, NY. Brokerage Services are provided by TIAA-CREF Brokerage Services, a division of TIAA-CREF Individual & Institutional Services, LLC. Member FINRA/SIPC.
©2011 Teachers Insurance and Annuity Association–College Retirement Equities Fund (TIAA-CREF), 730 Third Avenue, New York, NY 10017.
C1302
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